A Hindu Undivided Family (HUF) bank account is ideal for you and your family to manage assets collectively. It allows your family’s HUF to conduct financial transactions separately from individual members.
If you’re wondering how to open an HUF bank account, HUF bank account eligibility, and the HUF bank account opening process, let’s get into everything you need to know.
HUF Bank Account: Meaning
An HUF bank account is an account which is opened in the name of a Hindu Undivided Family. The bank account allows it to receive income, make investments, and manage expenses separately from its members. The Karta is in charge of operating the bank account on behalf of the family.
HUF Bank Account Benefits
Below are some of the advantages that come with opening a HUF bank account for your family:
| Benefits | Description |
| Separate Taxation | Income earned by the HUF is taxed independently from individual members, helping reduce the overall tax liability. |
| Wealth Management | An HUF bank account allows your family to manage all assets and investments under a single legal entity. |
| Business Transactions | All transactions related to the family business operated by the HUF can be conducted through the HUF bank account. |
| Financial Independence | It distinguishes between personal finances and family-owned assets, promoting financial clarity and control. |
HUF Account Eligibility: Who Can Open One?
To open or set up an HUF bank account, the following eligibility criteria must be fulfilled:
- The entity should be a Hindu Undivided Family comprising persons related by blood and governed under Hindu law.
- The HUF must have a valid Permanent Account Number (PAN).
- The senior male in the family, Karta, must act as the account operator.
- Other family members should be listed as beneficiaries.
Documents Required for HUF Bank Account
When applying for an HUF bank account, you are required to submit the following documents:
1. HUF Declaration Form
The primary requirement is to sign the HUF declaration form, which confirms the existence of the HUF and lists all its members. Karta and all members of the HUF must sign the form.
2. HUF PAN Card
A separate PAN card has to be obtained in the name of the HUF, as it serves as the tax compliance document for availing of the HUF bank account.
3. Identity and Address Proof of the Karta
You may provide an Aadhaar ID, Passport, Voter ID, or Driving Licence for identity proof. You must also submit proof of address, such as utility bills or bank statements.
4. Proof of HUF’s Existence
You’ll need to provide proof of your family’s HUF, which can be done by submitting documents showing inheritance of ancestral property or an affidavit signed by the Karta.
5. HUF Bank Account Opening Form
You must fill out and submit a complete application form provided by the bank. Along with the required documents for processing.
HUF Bank Account Opening Process: Step-by-Step Guide
To open a HUF bank account, please follow these steps:
Step 1: Obtain an HUF PAN Card
Before opening a bank account, your family’s HUF must have a separate PAN card. You can apply through the Income Tax Department or authorised PAN service centres.
Step 2: Draft an HUF Declaration Form
You must prepare a declaration letter which mentions the following:
- The name of the HUF.
- The Karta’s name and role.
- Names and signatures of all members.
Step 3: Choose a Bank and Collect the Application Form
You can visit any bank you choose to ask for a HUF bank account opening form. Alternatively, online versions of the forms are available since many banks offer this option for convenience.
Step 4: Submit Required Documents
Attach all the required documents, which include:
- HUF PAN card.
- HUF Declaration Form.
- Identity and address proof of the Karta.
- Filled and signed the HUF bank account opening form
Step 5: Make an Initial Deposit
Most likely, you will be asked to make a minimum deposit as required by different banks to open a HUF account for your family. The initial deposit might differ according to the bank’s policies.
Step 6: Account Verification and Activation
The bank verifies these transactions once the required documents and initial deposits are submitted; if these documents are verified successfully, your HUF account is activated, granting you access to the chequebook, online banking, and passbook.
HUF Bank Account: Taxation
Among the advantages of having a HUF bank account, the major one is the tax benefits it offers. Below is how the HUF bank account taxation works:
- A separate tax exemption limit of ₹2.5 lakh is offered under the Income Tax Act.
- Deductions under Section 80C, based on the investments and insurance, can be claimed separately from individual members of the HUF.
- Income earned by a HUF from rent, investments, or business profits is taxed separately under the same slabs as individuals.
Take Control of Family Wealth with a HUF Account Today
Creating a Hindu Undivided Family bank account is the best strategy for tax planning, wealth management, and financial independence for your family. The process is relatively easy, especially if you have the required documents and follow all the correct steps. Understanding how to open a HUF bank account can help you and your family reduce tax burdens while managing funds collectively.
